Tesla Now Looks To Europe As The Next Growth Engine

By: Trefis

Posted: 12/19/2012 4:11:00 PM

Referenced Stocks: TSLA

A few days after announcing that its
cash flows
had turned positive, Tesla Motors (
TSLA
) has opened a new assembling plant in Netherlands as its first
foray into the European electric car market. Although the auto
industry is struggling in Europe with sales down 8% this year, the
luxury industry is much better off.

Besides Europe, the automaker also opened its first retail
outlet in Canada in November. More than 13,000 reservations of
Model S have been made globally through September. We forecast
Tesla to sell around 18,000 units of its Model S in 2013, but given
its good reviews and overall reception, the automaker could
comfortably sell all of its cars produced.

The distribution facility will be used for warehousing as well
as assembling purposes and is not a production facility. The
fact that Tesla will assemble its vehicles in Europe will help the
automaker circumvent import tariffs. But due to high VAT taxation
in the region, the price of its cars in Europe could be higher than
that in the U.S. The base price of Model S starts from $60,000
in the U.S. (without the Federal assistance of $7,500) and prices
go as high as $95,000 for the Model S Performance.

Tesla is also in the process of setting up Supercharger
electric car charging stations across the U.S. where its customers
can recharge their batteries for free. However, these will not be
present in Canada or Europe and could turn away potential
customers. Along with the initial high cost of purchasing an
electric car, the inconvenience caused due to a lack of charging
stations acts as a big deterrent for customers looking to buy
electric cars.

Production for the Model S is scheduled to rise dramatically to
400 units a week in 2013. The electric automaker only sold 268
units in the third quarter due to limited production. The electric
car manufacturer, which originally projected annual revenue in the
range of $560-600 million at the start of the year, later revised
it downward to $400-440 million primarily due to a decline in the
expected number of Model S units produced during this year.